2.3 Security lending contracts (81.57 kB)
The Bilateral security lending facility is a tool for clearing members that wants to provide an efficient and safe shorting product towards their end clients. The facility is a bilateral arrangement in which the borrowers and lenders clearing representatives are known to each other.
Oslo Clearing offers clearing of Borrowing and Lending on securities deriving form shares quoted on Oslo Stock Exchange. The parties involved agree on the terms and conditions of the loan amongst themselves, including the number of shares, interest compensation for the lender and the loan period.
Bilateral security lending contracts are registered within the VPS system by the Lenders and Borrowers clearing representative. All loans needs to be electronically approved by Oslo Clearing before we will act as the guarantor on behalf of all borrowing and lending positions. VPS will also function as the register of legal rights linked with borrowing and lending.
Technically the underlying securities will, after matching by Oslo Clearing, be transferred from the lenders account to the account given by the borrower and at the same time a loan derivative position will be registered at the borrowers and lenders account. Oslo Clearing will handle functions relating to contract administration, clearing, regulation of which securities that can be lent, as well as collateral calculation and financial remuneration. The standard conditions for bilateral securities borrowing and lending set the rules for participation and Oslo Clearings' liability.
Term of the loans
Loans are either set up as open-ended or fixed terms loans. An open ended loan mature either when the borrower returns the loan or when the lender call in the loan while a fixed end loan mature at given end date.
Calling of securities
Lenders can demand all or part of the lent securities to be returned through their clearing representatives.
Oslo Clearing offer a very flexible compensation model where the Lenders and Borrowers can agree on interest rate, minimum transaction fee, open or fixed term loans and variable or fixed interest calculation method.
Margining and collateral management
Oslo Clearing calculates margins on the loan on a daily basis and ensures that the borrower can return the shares. The loan can be included in the margining portfolio made up of shares, standardized derivatives, OTC derivatives and loans which gives the borrower very efficient netting effects.